Sailors beware: P2P piracy will sink your jobs by 2015

Yet another study on Internet piracy appeared last week, and it's a biggie. Commissioned by the International Chamber of Commerce's Business Action to Stop Counterfeiting and Piracy group (BASCAP), it concludes that the entertainment sectors of European Union countries could lose €240 billion ($324.6 billion) in revenue and 1.2 million jobs by 2015.

"Digital piracy is sweeping through global markets," warned an ICC BASCAP guy in the accompanying press release. "In its wake, these creative industries suffer devastating economic losses and an assault on their ability to compensate artists and furnish legitimate employment opportunities. These dire consequences call for an urgent response by policymakers, consumers and the creative industry itself."

The analysis is loudly endorsed by EU entertainment industry trade associations and unions. And, speaking of policy changes, the report comes as Britain ponders its Digital Economy Bill, which even made the Queen's Speech of last November. The proposed law would let British ISPs crack down on deemed illegal file sharers by suspending accounts, limiting broadband speeds, blocking or curtailing access to certain sites, or limiting service to subscribers "in another way" (suggest your hypothetical punishment here).

But some of the assumptions here left us scratching our heads.

Le Vice P2P

"Building a Digital Economy: The Importance of Saving Jobs in the EU’s Creative Industries" presents itself as a breakthrough in anti-piracy research in that it tries to be more rigorous about what kind of jobs are really at risk (we've been complaining for a while about how vague most studies are about this). It divides the fields that create these jobs into two broad categories: "core" and "non-core" digital creative industries.

"Water transport"? We searched the report for some more precise definition of this "non-core" industry, and found none. So here's the thinking, as best we can guess. As more and more EU consumers buy pirated DVDs or download their audio/video content for free via P2P,they will eventually hurt the folks who transport DVDs, CDs, computers, audio/video receivers, musical instruments, and "other household goods" across land, air, and sea through snow, rain, heat, and gloom of night.

In the case of H2O, this would presumably include container ships and the tugboats that guide them to shore—soon to be scuttled by young Jacques and his BitTorrent habit.

Orders of magnitude

The analysis claims that the "whole creative ecosystem in Europe" produced about €860 billion of "value added," representing 6.5 percent of the European workforce. The big challenge, of course, is how to extrapolate the loss of 1.2 million jobs half a decade from now.

"Building a Digital Economy" acknowledges this is a toughie, especially because of the "technical difficulty in determining the weight of the non-core industries on a country level [for a job loss formula] because of gaps in the Eurostat data, which form the basis of the calculation." The results should be treated with "caution."

Here's the methodology:

First, take the number of illegally downloaded or streamed files plus the number of physical counterfeit media products sold each year. Create a substitution rate, representing the number of items that probably would have been sold if the Queen and her agenda setting equivalents for France, Germany, Italy and Spain had already gotten their way. To its credit the report applies conservative substitution rates of 10 percent for music and similar percentages for video; none of this "every download is a lost sale" stuff is in evidence.

Next, punch in retail prices for these items in those countries, which represent nearly 75 percent of Europe’s GDP, and crunch retail losses for all of them.

From this formula, the study calculated €10 billion in revenue losses and more than 185,000 jobs lost due to piracy in 2008, mostly of the digital kind.

From these repositories of data, the report extrapolates two possibilities. One is that "piracy behavior" will continue to center on P2P, resulting in a cumulative EU revenue loss of €32 billion and job losses of 610,000 by 2015. The other assumes that "digital piracy techniques will be further diversified" way beyond P2P, et voila—€240 billion and 1.2 million jobs down the river by that year.

Percentage decline

Hopefully this is not the last word in illegal file sharing research. Don't get us wrong. We think that P2P file sharing, counterfeit DVD sales, and illegal IP video streaming costs jobs. People download this stuff for free or buy/stream it on the cheap, the content providers lose sales, and to the extent that these companies channel their revenue back into production, less folks get hired to make, distribute, and sell their stuff.

But several key assumptions in this study are so full of holes they could retire Captain Nemo's sub, especially when it comes to "non-core" industries. Where's the link between device manufacturing and P2P use here? In fact, it could be argued that illegal file sharing to some degree drives the consumption of computers, media players, and software, as consumers gorge themselves on free digital fare. This has long been a complaint against companies like Apple, in fact; how dare they make so much cash on hardware when people just buy iPods to load them up with illegal content!

Why doesn't this study grapple with surveys indicating that file sharers also buy lots of content? How much IP video will actually be illegal (think Hulu, YouTube, BBC iPlayer, etc.)? And why doesn't "Building a Digital Economy" take into account this paragraph from the very Cisco report that it cites?

Peer-to-peer (P2P) is growing in volume, but declining as a percentage of overall IP traffic. P2P file-sharing networks are now carrying 3.3 exabytes per month and will continue to grow at a moderate pace with a CAGR of 18 percent from 2008 to 2013. Other means of file sharing, such as one-click file hosting, will grow rapidly at a CAGR of 58 percent and will reach 3.2 exabytes per month in 2013. Despite this growth, P2P as a percentage of consumer Internet traffic will drop to 20 percent of consumer Internet traffic by 2013, down from 50 percent at the end of 2008.

Given its willingness to use reasonable substitution rates, the report makes for some decent reading if you're trying to understand what's currently happening to the creative sector, but it's only a place to start. The "non-core" assumptions suggest plenty of dubious job losses, and a complete picture of industry health would need to look at the big revenues raked in by movie theaters and live concert promoters.

73 Reader Comments

What ever they do, P2P Bittorrent file sharing will not stop. They cannot win and in fact I contend that in reality they have all really lost. It is all very very pointless and will have almost not effect in the long run. To completely stop file sharing I think that the entire Internet would have to be taken control of and re-shaped by the governments of the world. Fat chance of that happening.

What did they calculate as the water-transport losses due to a market shift from physical products to digital consumption, excluding piracy costs?

Where did they assume this €240bn would come from?If people suddenly spend €240bn on media products, surely they are diverting that €240bn from other places, depriving them of revenue and costing them jobs?

Yes, that money might be going to foreign countries for foreign goods, but equally it could be going to other places in the EU. If I am pirating content and then buying European made sofas to sit on so I can watch this content, then that is €500 on a sofa, going to the sofa people, even though the media people are missing out on €500. But the money is still in the EU.If I spend my €500 on media and don't buy a new sofa, then the sofa business suffers and people lose jobs.

And as usual they fly off into lala land immediately. The assumption that every pirated download is a lost sale is bollocks and indefensible and they've been leaning on it for decades to inflate their numbers.

It just goes to show how little anybody cares that nobody's called them on it.

And as usual they fly off into lala land immediately. The assumption that every pirated download is a lost sale is bollocks and indefensible and they've been leaning on it for decades to inflate their numbers.It just goes to show how little anybody cares that nobody's called them on it.

Exactly.

Quote:

The proposed law would let British ISPs crack down on deemed illegal file sharers

To completely stop file sharing I think that the entire Internet would have to be taken control of (and re-shaped) by the governments of the world. Fat chance of that happening.

That won't stop them from trying. It's obvious the inlet is impossible to plug, this would require the submissive control of all ISPs throughout the world; think SPAM control as an epic fail.

The object here, I think, is simply to justify legally repressive laws within civilized countries and at their borders in order to permit half-private copyright-based retribution schemes, à la RIAA litigation campaign flavour but cubed several times.

hmm, job losses. Now there is a slippery slope. When one transitioned from hand cranked to engine driven presses, was there a cry over the number of jobs lost to that?

in any other sector of the economy, if something is automated for efficiency, resulting in people loosing their jobs, its progress. And maintaining the existing system for sake of the workers is "luddite" mentality.

I'm sure I could spend more money on creative industries products - but this would leave me less to spend on fuel, cigarettes, alcohol etc - i.e. the high tax things that are non-essential. The fact is - I don't have enough money to buy CDs, DVDs, games etc at the extortionate prices they charge. I will continue to use whatever legal services (last.fm, spotify) to discover new music. I will continue to buy CDs at the sub £4 price point - or I buy used - and the only losers are those industries that continue to try and prosecute me for "stealing" content.

To its credit the report applies conservative substitution rates of 10 percent for music and similar percentages for video; none of this "every download is a lost sale" stuff is in evidence.

however i do agree with lala land in terms of ignoring the move to legal digital distribution - which will hurt some of those 'non core' businesses anyway, like the shipping company example. they certainly seem to have skimread the Cisco report and picked out data to suit their argument, which always makes a study look good.

its better than some reports on the subject but the obvious hint on policy changes (ostensibly to protect the arses of Big Content and co.) diminish its value to me...

these IP organizations should spend less money on writing these kinds of reports, and more money on finding solutions to their quagmire. I'm sure as hell not going to change my P2P ways, and the way things are going, P2P will become increasingly effective at large-scale distribution of digital movies, music, software, games, etc.

In the 2000s - "Napster + MP3 piracy is sweeping through global markets,"

In the 90s - "CD Copying piracy is sweeping through global markets,"

In the 80s - "Vinyl and Tape copying + Bootleg piracy is sweeping through global markets,"

In the 70s - "Taping off the radio is sweeping through global markets,"

In the future - "Whistling a song while walking down the street piracy is sweeping through global markets,"

Dear Industry, if you simply fucked off and died, the Human Race would find something else to do, like perhaps go outside more often, do outdoor projects, see more family, but ultimately it would still survive.

The fact is, in the past you screwed us all, especially the 90s with your stupidly high (and ever-increasing) prices, and we had to either lump it, or go the the bloke on the corner. But now, your back is to the wall, you're trapped - like a caged animal, and you have nowhere to go or hide, and you don't like it.

But what makes it even more funny is that the power has now shifted to us, the consumer.

But what now ? You want that power back, the power you had in the past, but that is never going to happen unless you throw bribe money to Governments to BUY you this power back. So, essentially, you are going to try and pressure-bribe Governments to tell consumers how YOU want them to behave, and if they don't conform to this they lose a rather essential part of their life, something thats becoming even more essential as things like banking moves to the Net.

Back before Christmas last year I tried to buy my Mum a CD online, it wasn't yet available in our local shops, but we wanted to do this legally so she could try out her new portable music player. When it came to the checkout we were told that this download wasn't available in our region, WHY ? What boundaries do digital downloads have ? It was available, funny enough, on Pirate Bay. You do this so you can control things, don't you ? You can probably shaft me for more money if I can only get this in my country, yet the digital download still resides in the same country I originally tried to get back last year.

You should really take a huge step back and look at yourselves, and what the draconian measures you propose are going to do to people, and how they affect their lives.Offer people like ME, a way to PAY for my music exactly how I want to pay for it, and stop withholding music because of some invisible barrier.

If I spend my €500 on media and don't buy a new sofa, then the sofa business suffers and people lose jobs.

+++

That's a very important point. All these talks about "lost jobs" are extremely disingenuous. I mean, should we also care about the lost jobs of buggy whip manufacturers? I certainly understand that the potential loss of creative jobs may be a serious issue. But only an extremely biased organization would drag "non-core" industries into this - especially because legal electronic distribution is just as damaging to them.

Hey Ars, don't feed the troll. By posting stories about their made up numbers and 'studies' it makes them think people actually believe them., but then again some politicians believe or are at least paid to.

So do they assume linear growth of music and movies - ie if music is x% of current traffic, do they keep assuming it is x% of traffic in the future. I ask this, because I suspect that copyright violators already download about as much music as they are going to, so all growth will be in the film/tv sector.

Also is the growth treated as if it is all the same kind of traffic? Ie a lot of the growth might be to shifting to HD versions of content by the copy right violators (from DVD quality to Blu Ray). Since a DVD is 6 GB and Blu Ray - 27 GB or such. A 4 fold increase in traffic might represent only a 20% increase in lost sales.

Letting the content providers try to gum up the Internet for the sake of propping up their antiquated business model is like saying 100 years ago that we should make cars go no faster than 1 MPH for the benefit of the owners of horse stables.

Times have changed, the economy has changed, we shouldn't be inconvenienced because some people are too lazy to update their business model.

Well it sounds like the BS industry is alive and flourishing. Perhaps all this extra manure can be shipped to Africa where it can do some good adding nutrients to the soil. We can send it via boat to ensure that jobs will not be lost.

If people suddenly spend €240bn on media products, surely they are diverting that €240bn from other places, depriving them of revenue and costing them jobs?

Exactly. Well said. It isn't like people have unlimited money. It isn't like people are pirating and then sticking thousands and thousands of dollars in the bank! Hell, you know where that money is PROBABLY going? To OTHER entertainment sources--movies, concerts, etc.

From the article: In fact, it could be argued that illegal file sharing to some degree drives the consumption of computers, media players, and software, as consumers gorge themselves on free digital fare.

Exactly. I would even venture further and say that hardware vendors encourage this kind of media file sharing. Take the most popular music player as an example: the ipod. In their website Apple proudly announces that the ipod classic holds "up to 40,000 songs" as the first important feature of the device. That's the marketing for it. I would like to see anyone tell me with a straight face that Apple seriously thinks its target demographic would pay close to 40,000 dollars (at the almost $1 price of their own store for most of the songs) to fill the thing with music. Same goes for the Zune and any other music player of large capacity. Now on the video front: Seagate Freeagent Theater, WD TV Media Player, etc. These are media players that take an external hard drive as their media container and hook up to your TV to play whatever you have in it. PR on them revolves around how many file types they can play, including divx, xvid and mkv. Who in their right mind actually thinks people will plug in their 2TB external hard drive full of mkvs and divxs that are strictly legal? Is it even possible to make a legal mkv from a Bluray? Are there any legal mkvs around that come from the entertainment industry in any way? Let's not kid ourselves, these companies are proudly announcing that their player can process your pirated video straight to your TV in its full 1080p glory, all you have to do is buy their players, along with their external hard drives of course. And you know what? They're actually great products. The market is already digital, so content providers will have to rise up to the challenge and find a way to thrive in this environment, I'm sure it can be done even with pirates around.

I wonder if anyone have calculated the losses (in revenue and jobs) in the transportation due to iTunes music store and all other places where you can buy media online. After all that must cause just as much damage to the transportation sector as piracy, after all people who don't download illegaly have started to switch away from physical mediums.

The problem, IMO, for big content providers isn't whether or not jobs are being lost to piracy - it's the fact that the value of content is falling.

Let's assume for a second that piracy wasn't a problem. Even if this were a perfect world and all digital content were legally downloaded/streamed/etc, the very fact that content is more available and can be consumed faster than before drives its value down.

How? Our on demand access to virtually any type of digital content has, in effect, pushed the supply WAY up (especially in certain isolated content genres where supply may not be that great in retail stores), while the demand has remained steady. So since the market is supersaturated with content (even if all that content is/was legal), the value of said content goes down. (I'm guessing this is why big content providers cling to their aging business models so veraciously).

Unfortunately I have no data to back this up, but this is what I have observed to be true.

Another report that assumes that money just vanishes when it's not spent on media industry products. How hard is it to understand that it's a zero sum thing. What is not spent on overpriced crap they produce these days is spent on something else so economy doesn't lose anything.

Same goes for the Zune and any other music player of large capacity. Now on the video front: Seagate Freeagent Theater, WD TV Media Player, etc. These are media players that take an external hard drive as their media container and hook up to your TV to play whatever you have in it. PR on them revolves around how many file types they can play, including divx, xvid and mkv. Who in their right mind actually thinks people will plug in their 2TB external hard drive full of mkvs and divxs that are strictly legal? Is it even possible to make a legal mkv from a Bluray?

In fairness, I use a 2TB drive to hold copies of blu-ray and hd-dvd films I own. At about 20-40GB per movie, it adds up pretty fast. As far as the legality of doing so - I guess it depends on what country you live in.

If people suddenly spend €240bn on media products, surely they are diverting that €240bn from other places, depriving them of revenue and costing them jobs?

Exactly. Well said. It isn't like people have unlimited money. It isn't like people are pirating and then sticking thousands and thousands of dollars in the bank! Hell, you know where that money is PROBABLY going? To OTHER entertainment sources--movies, concerts, etc.

huh, and here i thought credit cards where just that, unlimited money...

Let's assume for a second that piracy wasn't a problem. Even if this were a perfect world and all digital content were legally downloaded/streamed/etc, the very fact that content is more available and can be consumed faster than before drives its value down.

and with the change to digital, format shifting became basically limitless. End result, no need to re-buy that album once you have the cd in hand, just pop it in the pc, grab a flac version, and use the flac version to create a mp3, oga, aac or whatever. Or even, with the right hardware, turn it back to analog.

mdfrncs wrote: In fairness, I use a 2TB drive to hold copies of blu-ray and hd-dvd films I own. At about 20-40GB per movie, it adds up pretty fast. As far as the legality of doing so - I guess it depends on what country you live in.

Well, yes, a system like that can be used like you do. Even though I don't know how you made the mkv file from the Bluray, I would say it violates the copyright, but since you own the movie, I wouldn't qualify it as pirated (although the manufacturer must know it violates the copyright and still sells the equipment). You must be in an extreme minority though, I don't have actual statistics but I think everyone will agree most of the content played in these players will be pirated. In cases like yours, I really don't know why you would choose to play a compressed version when you have the full quality one available. Backing up originals in a hard drive is one thing, a company advertising its media player product plays mkv files in your TV is a different issue. My point was about the players and the advertising of the capability to play mkv, divx, xvid and a bunch of other formats that in all seriousness probably come from pirated media.

mdfrncs wrote: In fairness, I use a 2TB drive to hold copies of blu-ray and hd-dvd films I own. At about 20-40GB per movie, it adds up pretty fast. As far as the legality of doing so - I guess it depends on what country you live in.

Well, yes, a system like that can be used like you do. Even though I don't know how you made the mkv file from the Bluray, I would say it violates the copyright, but since you own the movie, I wouldn't qualify it as pirated (although the manufacturer must know it violates the copyright and still sells the equipment). You must be in an extreme minority though, I don't have actual statistics but I think everyone will agree most of the content played in these players will be pirated. In cases like yours, I really don't know why you would choose to play a compressed version when you have the full quality one available. Backing up originals in a hard drive is one thing, a company advertising its media player product plays mkv files in your TV is a different issue. My point was about the players and the advertising of the capability to play mkv, divx, xvid and a bunch of other formats that in all seriousness probably come from pirated media.

as a MKV can hold any video+audio format, it could be that he is basically stripping the DRM of the blu-ray, keeping the H264 or whatever is inside, and rewrapping it in MKV. No compression or format shifting needed.

Only the "scene" have made a "community standard" saying that mkv shall hold a so and so h264 with a so and so aac, and that avi shall hold a divx/xvid with mp3 audio.

Futility Is key to any good crusade/war on (insert whatever). If problem X could actually be solved the people who make money trying to solve problem X would be out of work. This means that worthy causes that may actually be solved very rarely get promoted with big $.

It seems there is a simple process for determining if a cause is worth monetizing.

1. Observe that X is an innate part of human nature. 2. X is thought of as bad by a large enough % of a populous that money can be generated by fighting X. 3. Ask for money to fight X. 4. Fight X just hard enough to make it look like something is being accomplished.5. go to step 3.

Sounds like some don't realize that killing the goose that lays the golden egg isn't in their own long term best interest.

more like, jobs freed up to be moved other places. Heck, london exploded in size during the industrial revolution, iirc. Still, thanks to the ever increasing automation, i start to wonder when we will hit the point where we have more production capacity then we have consumption capacity, mostly thanks to money not returning to the very people doing the consuming, the workers.

that depends, do the computers and networking gear result in more fossil fueled electricity being used?

And that answer is only a short-term answer. Getting rid of the use of machines powered directly by fossil-fuels and replacing them with machines powered by electricity that is generated by fossil fuels is still a much better idea in the long haul. The day that fossil-fuel electricity is replaced with a cleaner electricity means that every device using that electricity is now cleaner as well with no more change required.

hobgoblin wrote:as a MKV can hold any video+audio format, it could be that he is basically stripping the DRM of the blu-ray, keeping the H264 or whatever is inside, and rewrapping it in MKV. No compression or format shifting needed.

Ok, it makes sense from the convenience perspective to do that, and yes, I know mkv is just a container format, but in order to get one from a Bluray you effectively have to do what you just said about stripping the DRM, which is illegal (not an issue in my opinion if you own the disc). Still, we are just talking around technicalities of how this can possibly be used in a legal way. On the practical real world on the other hand, how many legal mkvs can you find ready for digital distribution that are compelling enough to drive sales of Seagate or WD media players? Sure, there's nothing there ruling what you can put in an mkv, but I'm pretty sure the bulk of them are pirated HD content and the companies selling the hardware to play it know that. So the point the entertainment industry made about hardware companies being hurt by piracy is not entirely accurate and makes them look less serious.

By the way, any comments on the $40,000 ipod content? Assuming you fill it with the 40,000 songs as it is advertised. I know you can put podcasts, video, etc., but the marketing on the site still says 40,000 songs.

Matthew Lasar / Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz.